Why Compensation Management
Compensation Management supports the annual salary review and bonus calculations based on achievement of business goals and/or individual goals without distributing data outside SuccessFactors.
The solution offers definition of budgets and guidelines to support the manager’s decision on how to distribute the budget within the team – typically based on a combination of geographical, functional, and hierarchical variables and some companies also use ratings from performance reviews. Additional data elements are displayed to support the managers in the process, and the process is supported by a configurable approval flow.
Bonus calculation is based on bonus plans with different objectives and levels for various groups of employees – and the employees are assigned to the correct bonus plan based on the master data of the employee. The solution automatically prorates the calculation if the employee moves between bonus plans during the year.
Compensation Management also supports a spot bonus process – both for monetary and non-monetary rewards. This part is even supported via mobile devices.
Using Compensation Management ensures that you comply with GDPR, and it removes the risk that company sensible data is shared via spreadsheets. Worksheets holding information regarding the direct reports are made available directly in SuccessFactors – and organizational changes are taken into consideration according to your needs (completion of the salary review by the old or the new manager).
When the Annual Salary Review process, Bonus Calculation and/or Spot Bonus is completed, salary information is updated in EC – this ensures high data quality and that data is available for payroll in time – and compensation statements are generated and stored within SuccessFactors. Data does not leave the SuccessFactors solution and everything is protected by the built-in permission roles concept.
Which elements are included in Compensation Management
Eligibility rules (defining which types of payments are valid for a given employee) is defined based on the master data. Using this method, it is possible to define complex rules taking different aspects of employee master data into consideration – in combinations of “and” and “or” rules, and “equal to” and “not equal to”.
The same tool is used to assign employees to the correct bonus plan – and possibly different bonus plans at different times of the year.
Guidelines are used to provide support to the manager in the decision on how to distribute the budget. HR will analyze the changes to salaries in the different job markets relevant for the company – possibly based on external sources. The purpose is to spend the budget wisely to ensure that the right combination of equality and sustainability of employees is achieved. n certain geographical areas, competition for a certain type of employee is higher than for another type of employee in the same area, or for the same type of employee in another area.
Guidelines are configured to take various types of data into consideration. The variables are typically based on combinations of geographical, functional, compa ratio, and hierarchical dimensions (and sometimes performance ratings):
- Geographical, because inflation rates differ
- Functional, because positions in various types of jobs on the same level may fluctuate according to different patterns
- Compa ratio, because an employee who is aready paid above the pay range should receive a lower salary increase than an employee who is paid below the pay range
- Hierarchical, because the company may experience difficulty in keeping i.e. management but not specialists – or the other way around
- Performance ratings, if the company has a “Pay for Performance” culture, even for the basic pay
Guidelines consists of up to five amounts: Minimum, Low, Default, High, and Max. If increases are suggested below Low or above High, a warning message is displayed, and it is configurable if warnings or errors are displayed if increases below Minimum or above Maximum are suggested.